Trump Policies Could Send US Economy Back to 1970s

Trump Policies Could Send US Economy Back to 1970s

Former Federal Reserve Chairman Alan Greenspan reportedly warns that Donald Trump's economic policies risk plunging America into a period of 1970s-style stagflation with low growth and "out of control" inflation.
Greenspan also expressed "grave concerns" about the future of the eurozone, where countries in northern Europe such as Germany have "in effect been funding the deficits of the South," news outlets reported.
Speaking in an interview in the February issue of "Gold Investor"—a magazine issued by the World Gold Council, Greenspan also argued that imbalances in the economic strength of eurozone nations make the continued function of the single currency area a major concern.
Under Trump, Greenspan warns that America could enter a "destabilizing period" where inflation rises sharply as workers begin to demand higher pay.
This could return America to "what happened in the 1970s, when we last experienced stagflation and there were real concerns about inflation spiraling out of control,” he predicted.
The Federal Reserve was forced to raise rates to 20% to keep a lid on inflation, but the move also threw the economy into recession and pushed up unemployment.
"I hope that we don't have to repeat that exercise to stabilize the system. But it remains an open question," said Greenspan.
Despite a volatile and controversial first few weeks in office, Trump will be a demanding leader who applies the best of his negotiating skills to push for US growth, bestselling author David Horowitz told thestreet.com.
Trump won’t be an ideological purist like Republicans who support free trade but don't fight for fair trade, Horowitz said.
Horowitz's new book "The Big Agenda: President Trump's Plan to Save America," released just this week, reveals Trump's "first 100 days strategy" to roll back Obama's legislative and executive record.
“If you just say, ‘well we're for free trade and we're not going to look at the deals that we make’—that's not a good idea,” he said. “We've had an anti-business president now for eight years who doesn't take a hard-nosed attitude towards these deals. Trump is going to get better deals for us, which is still free trade.”
“If the economy grows as it will under Trump, there's going to be a lot more money to spend,” he said.

Warning to Europe
Greenspan has a dire warning for Europe. Simply put: "The eurozone isn't working."
Those imbalances, he said, are largely down a north/south geographical line, with the bloc's more prosperous nations such as Germany consistently funding the deficits of southern states. That simply can't go on, Greenspan said, Business Insider reported.
"The European Central Bank has greater problems than the Federal Reserve. The asset side of the ECB’s balance sheet is larger than ever before, having grown steadily since Mario Draghi said he would do whatever it took to preserve the euro. And I have grave concerns about the future of the euro itself. Northern Europe has, in effect, been funding the deficits of the South; that cannot continue indefinitely. The eurozone is not working."
The morning after Britain voted to leave the European Union, Greenspan told CNBC: "Brexit is not the end of the set of problems, which I always thought were going to start with the euro because the euro is a very serious problem."
Back to Gold Days
During the same interview, Greenspan once again defended the gold standard monetary system that was widely followed by economies around the world until the 1930s.
The gold standard pegged the value of currencies to the precious metal at $35 an ounce, and the US Federal Reserve promised other central banks to exchange dollars for gold, and vice versa.
"I view gold as the primary global currency," Greenspan said. "Today, going back on to the gold standard would be perceived as an act of desperation. But if the gold standard were in place today we would not have reached the situation in which we now find ourselves. We cannot afford to spend on infrastructure in the way that we should," he added.